Riverstone creditors to be paid in full

Published: September 29, 2006

The bankrupt shell of Riverstone Networks plans to pay off its creditors in full and send out an initial distribution to shareholders today, the company announced on its Web site Thursday.
Shareholders will be getting $1.06 per share, 2 cents below the stock’s selling price in February, before the Cabletron Systems spinoff Riverstone declared bankruptcy and the Securities and Exchange Commission halted trading.
How much more shareholders will eventually receive depends mainly on home much is paid out to former officers,
Riverstone, its former insurer and to Lucent Technologies, which bought most of Riverstone’s assets in a bankruptcy auction in May.
While estimates vary, the total amount - including the initial distribution - is not expected to exceed $1.40 a share, about a tenth of the stock’s value when it was spun off from Cabletron in 2001.
Cabletron, formerly based in Rochester and once the state’s largest employer, spun off Riverstone and Enterasys Networks in 2001, but both companies have been plagued by accounting scandals. Nine former Enterasys officials have been indicted for securities fraud, with four pleading guilty and five scheduled for trial on Nov. 7 in U.S. District Court in Concord.
According to bankruptcy papers, there also is an ongoing investigation of former Riverstone officials, many of whom were Cabletron holdovers. These officials claim that RNI Wind Down Corp. -- the Riverstone bankrupt shell after the sale to Lucent -- must pay them millions of dollars in legal expenses related to past, current and future investigations into the charges.
Subsequent officers also are claiming millions of dollars in compensation and legal expenses relating to investigations into the Lucent sale and other matters, including a missing computer hard drive.
Finally, Lloyd’s of London is demanding the return of money that it paid out to former officers, claiming Cabletron lied on its initial insurance application. Lucent claims it overpaid Riverstone more than $12 million for its assets.
The company put aside a certain amount in reserve funds to cover possible claims, plus any claims against the estate made by various attorneys, accountants and other professionals involved in the bankruptcy. The size of the reserve fund was not known by NHBR Daily deadline. - BOB SANDERS